A conversation with Vikram Pandit, CEO of Citigroup.
Pandit was the President and Chief Operating Officer of the Institutional Securities and Investment Banking Group at Morgan Stanley, where he was responsible for the overall management of the group and focused on the trading, sales, and infrastructure aspects of the business (2000–2005). Prior to that position, Pandit served as the managing director and head of the Worldwide Institutional Equities Division (1994–2000), and as the managing director and head of the US Equity Syndicate (1990–1994) for Morgan Stanley. Pandit left Morgan Stanley with a few colleagues to start a hedge fund named Old Lane Partners. Citigroup subsequently purchased the fund in 2007 for $800 million. Pandit received approximately $165.2 million for this transaction. Many analysts believe that this hefty price was paid for a hedge fund with only $4.5 billion under management to get Pandit onto Citigroup.
Citibank CEO Vikram Pandit on Charlie Rose
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More about Vikram Pandit
Vikram Pandit is the Chief Executive Officer of Citi. Before being named CEO on December 11, 2007, Mr. Pandit was Chairman and CEO of Citi’s Institutional Clients Group, which includes Markets & Banking and Citi Alternative Investments.
Mr. Pandit serves on the boards of Columbia University, Columbia Business School, the Indian School of Business, and Trinity School. He is a former board member of NASDAQ, the New York City Investment Fund, and the American India Foundation.
Mr. Pandit earned a PhD in Finance from Columbia University in 1986. He also received an MS degree in 1977 and a BS degree in electrical engineering in 1976 from Columbia.
The press is tying the entire tax asset to bonkiog of carry forwards. A hefty portion is foreign taxes. There are also a lot of other revenue recognitions for GAAP purposes not recognized for tax purposes. Finally, a major portion of the prepaid tax for GAAP purposes is providing for repatriation of foreign earnings. That is the profits of foreign units have not been included in US parent tax returns in full. Consequently Citi’s domestic tax loss carry forwards could have been extinguished to the extent of electing to deem all needed foreign earnings as repatriated and reinvested. Thus, the taxes provided for these deemed repatriated earnings would be credited out in the tax provision. Given Citi’s non US business this must be a huge number. Citi anticipating the loss of carry forwards would have lowered them to the extent of deeming foreign earnings repatriated. The net operating loss gift being trotted out here comes under Section 382 IRC and change of ownership problems must have been anticipated by the Citi tax people. Either way, I suspect whatever net operating loss carry forwards based on returns as filed for 2008 and prior carrybacks would be relatively minimal unless the bonus issue redemption of the Treasury stock were not anticipated. Citi would have made the foreign earnings election in the 2008 return which was filed in the last several months. Extensions are, after all, a planning tool. On the other hand, deliberately sacrificing the tax benefit for employee bonuses must surely be actionable by the shareholder’s including the Treasury.It would be very interesting to see all the details of the Citi Tax Provision for the last few years including 2008. Then 2009 is still underway and if the tax benefit were really at issue to get the bonus, CIOti could make as many deliberate inclusions in income as possible to kill current year losses. Obviously, Citi would trigger all possible tax losses already provided for in the financial statements to offset the deliberate income recognition items. Citi certainly has plenty of this kind of loss residing in non deductible reserve liabilities. Sell the junk to get the loss in other words. I do not think the Treasury or Fed would like dumping right now. Hence what they did was sound policy. But it surely was anticipated or am I giving too much credit to Citi ?The most basic tax competence involving net operating loss questions is to substitute all possible income recognitions and transference of what would be lost to increasing tax hard basis in assets of the parent and subsidiaries. In short, you get the deduction when you sell or liquidate the asset rather than simply letting it fall through the cracks as a waste.